Serbia's gas monopoly eyes pipeline in Bosnia

* Eyes pipeline in northern Bosnia

* Will consider building a pipeline arm to Sarajevo

By Ivana Sekularac

BELGRADE, Oct 15 (Reuters) - Serbia's gas monopoly Srbijagas will seek a concession to construct a pipeline through northern Bosnia with a total capacity of 1.2 billion cubic metres, the company's chief executive said on Thursday.

The aim is to link the Serb Republic to a section of the South Stream gas pipeline mulled by Srbijagas and Russia's Gazprom (GAZP.MM), Srbijagas's Dusan Bajatovic told reporters.

He added that Srbijagas has yet to negotiate with governments in Bosnia's two autonomous regions -- the Serb Republic and the Muslim-Croat federation -- about the project.

"That pipeline will go along Sava river to Banja Luka and will be enough to meet the needs of Serb Republic," he said. "We will offer to build one arm of pipeline to Sarajevo to supply the Muslim-Croat federation."

The South Stream pipeline arm would allow Serbia, through which all gas enters Bosnia, to diversify its gas supplies and avoid shortages, like the one in January during the gas row between Russian and Ukraine.

The Gazprom-led South Stream project has been designed to bypass Ukraine to transport Russian gas under the Black Sea to Bulgaria and onwards to Serbia and Europe. It is a rival to the European Union-backed Nabucco pipeline, which aims to reduce Europe's reliance on Russia for its energy supplies.

Part of the funding for the pipeline in Bosnia would come from a 150 million euro ($223.8 million) loan the European Bank for Reconstruction and Development (EBRD) is considering for Srbijagas, Bajatovic said.

"Out of that money, 50 million euros will be used for gas supplies, 50 million euros for construction of the gas storage facility and 50 million for our projects in Republika Srpska," Bajatovic said.

In June, Srbijagas signed a deal to take a 40 percent stake in Bosnia's regional gas firm, in a move seen by some as an attempt to control gas inflows to the neighbouring country.

Bajatovic added the state power monopoly should also soon finalize a $72 million deal this week with the Hungarian gas trading unit of E.ON (EONGn.DE) to rent a storage facility in Hungary to store 200 million cubic metres of gas.

Serbia should also complete its own gas storage facility in the northern part of the country for 300 million cubic metres of gas, he said.

"That should be enough to supply the market for 60 days," Bajatovic said. (Editing by Michael Kahn and James Jukwey)